Feds leave rates unchanged

The Federal Reserve left borrowing costs unchanged, continuing to delay any rate moves amid persistently low inflation.

The U.S. central bank voted unanimously Wednesday to maintain its benchmark interest rate in a range of 2.25 percent and 2.5 percent, a move that many anticipated despite stronger-than-expected growth in the first quarter of 2019 and an unemployment rate near a half-century low.

“Economic activity rose at a solid rate,” while job growth continued to be “solid, on average, in recent months,” the Federal Open Market Committee (FOMC) said in its post-meeting statement released Wednesday in Washington. “Overall inflation and inflation for items other than food and energy have declined and are running below 2 percent.”

Inflation weakness driving Fed’s patience

Following their April 30-May 1 gathering, however, Fed officials signaled that the primary driver for holding the federal funds rate steady is now inflation – and specifically why it’s continued to register below the Fed’s target during an expansion set to become the longest on record. Fed Chairman Jerome Powell said during the press conference following the meeting that those global risks had “moderated” since officials last met.

The Fed in its post-meeting statement got rid of any language saying that the economy had “slowed” from its previous robust pace and that inflation remained “near” its 2 percent target. They also noted that household spending had “slowed.”

Prices excluding food and energy, as measured by the Fed’s preferred gauge, cooled in March to 1.6 percent, the slowest pace since January 2018, according to the Department of Commerce.

“Those aren’t conditions under which the Fed feels compelled to change interest rates in either direction,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “The economy looks better than it did when the Fed last met in March, but with inflation readings continuing to decelerate, the Fed is no closer to resuming rate hikes.”

Pressure mounting for a rate cut

The Fed’s decision comes amid President Trump’s repeated calls for the U.S. central bank to cut interest rates. The chief executive on Tuesday renewed his requests in a tweet, urging the Fed to lower borrowing costs by one percentage point to send the economy “up like a rocket.”

The markets are also looking for signs of a cut. Fed watchers are betting there’s nearly a 30-percent chance that the U.S. central bank will cut rates at some point this year, according to CME Group’s FedWatch tool.

Officials, however, gave no indication of whether their next move could be a cut.  “We think our policy stance is appropriate, and we don’t see a strong reason for moving in one direction or the other,” Powell said.

information provided and written by:

SARAH FOSTER   @SARAHFFOSTER

MAY 1, 2019 in FEDERAL RESERVE

Bill Nickerson of Fidelity Cooperative Bank

Adjustable Rates 101

An Adjustable Rate Mortgage provides a specific fixed rate term before becoming an adjustable mortgage.  An example: A 10/1 ARM is fixed for the first 10 years and then becomes a 1 year adjustable rate for the remaining term of the mortgage, thus giving you 10 years  of security at a fixed rate.

Advantages: If you know that you are selling your home in a short period of time, 10-12 years or less, you can get a mortgage rate that is 3/4’s to 1 full percent below the traditional mortgage rates.  Today a 10 year ARM is 3.25% and you can borrower up to 2 Million Dollars.

How do they work?

Adjustable Rate Mortgages (ARM’s) come in many different varieties.  The most common ARM’s are the following:  Three Year, Five Year, Seven Year and a Ten Year.  You will also see them displayed in this format as well:  3/1, 5/1, 7/1 and 10/1.  The first number represents the amount of years the loan will be fixed for and will not change from its original start rate.  The higher the first number or term, the higher the interest rate will be.

The second number represents how often the ARM will adjust after the fixed rate term ends.  Using a 5/1 ARM as the example, when your fixed term is about to expire, the Lender will send you a notice via mail notifying you that your rate is about to adjust and what that adjustment will be.  This will occur 45 days prior to this expiration date, in this case that would be 60 months in to this loan (5 Years). The new rate will be set for one year, or the term that is stated in the second number, 5/1.

The adjustments are based on 2 variables, the index and the margin.  The margin is set on the day you get the mortgage and is usually in the range of 2.25 or 2.75 depending upon the type of ARM you go with.  This will never change and is set for the life of the loan.  We would then add the current Index to this margin and combined that would create your new rate.

The Index can come from many places but is selected when we lock in your loan.  Typically we use the One Year Treasury Bill or the One Year LIBOR.  Both indexes move fairly slowly.  These Indexes are always posted in the Wall Street Journal but is very easy just to Google these terms. This will show you the current rate as well as show the history of these rates. You can also click this site at the US Treasury

Today’s one year treasury is at 1.30, this is the index.  Add this to the margin of 2.50 and your new rate today would be 3.875%. This rate would be rounded up to the next highest 1/8^th and this would give us 3.875% for one year.  Remember, this is what the rate would adjust to after the fixed term has ended.

Caps: Your loan comes with caps of 5/2/5, each number represents how your loan will adjust.  With the first adjustment the loan can adjust 5% up or down from the original start rate. The second number “2” is what it can adjust each time for the remaining years of the loan.  So, the second adjustment and every one after that the rate can move up or down a maximum of 2%.  The last number is the Life Cap.  This rate will never go higher than 5% of the starting rate.  So if you lock in a rate of 3.25% today, your rate would never exceed 8.25%.  To give you an idea, since 1996, this rate has not exceeded 8.25% at its high point. In the last several years, this rate as adjusted downward and as low as 2.00% in many cases.

I hope this is helpful. Always feel free to ask questions about any of this information. Email me at Bill@billnickerson.com or call 978-273-3227.

Thank you very much,

Bill Nickerson NMLS# 4194 | Flagstar Bank| 1500 District Avenue, Burlington MA

Understanding how your Credit Works

Credit scores were developed by Fair Isaac and company (FICO). The models created using FICO take all the detailed information about your credit report and produce your credit score using different weights and factors contained in the FICO scoring models.

The purpose of a FICO score is to show how likely you are to become at least 90 days late in making payments in the next 24 months based on patterns in your credit history, compared with patterns of millions of past customers.

Fair Isaac divides the scoring range into five risk categories.

• 780-850 Low Risk
• 740-780 Medium, Low Risk
• 690-740 Medium Risk
• 620-690 Medium High Risk
• 620 and Below High Risk or “Non Prime”

Each of the three major credit bureaus uses their own version of the FICO scoring model. Factors influencing your credit score are:

• Current or late payments
• How late the payments are
• Number of open accounts you have
• How much credit you are using in relation to how much credit you have available
• If there are serious delinquencies on your file like bankruptcy, liens and charge off accounts

Your credit score is a snapshot, in that it is developed at the time of inquiry by a credit grantor pulling your credit file. Your credit score can change with the passage of time as well as with the addition of new information to your credit file. As delinquency information in your file ages, it’s negative affect on your credit score lessens.

Credit Scoring uses the following five areas of information to calculate the score:

• Payment history 35%
• Amounts owed 30%
• Length of credit history 15%
• New credit inquiries 10%
• Type of credit used 10%

It is best to keep balances low on credit cards and other revolving accounts – maintain balances below 50 of the available credit limit. 24 is optimal. The best way to improve your score is to pay down revolving debt.

An inquiry is defined as a request by a lender for a copy of an applicant’s credit report. Inquiries remain on a credit report for two years, but credit scores only look at inquiries in the last 12 months. Your own request for a credit report to review for accuracy is not considered in your credit score.

Apply for new credit accounts only when you need them. Remember that closing accounts does not make them go away. A closed account with a poor payment history may become a more recent account because the date of activity will change. An open account with a low or zero balance is better than a closed account.

HELPFUL WEBSITES FOR YOUR REFERENCE: You can obtain your free annual credit report, without a FICO score, at www.annualcreditreport.com

To contact the credit bureaus:

Experian  1-888-397-3742   www.experian.com

Equifax  1-800-846-5279 www.equifax.com

Transunion  1-800-916-8800  www.transunion.com

DID YOU KNOW??

1. FICO scores are used not only for a mortgage and credit cards, but for auto loans, insurance and utilities.
2. Credit reports reflect charge offs or collection accounts for up to 7 years, and bankruptcies for up to 10 years.
3. You can order a free credit report annually, at no charge, without impacting your credit score.
4. Having a minor balance without missing a payment is better than closing an account.
5. Paying off an old collection may result in a drop in your credit score.
6. Consolidating credit cards increases your ratio of debt to available credit and lowers your score.
7. Using the maximum amount on a credit line can drop your score by 100 points.

For more information regarding financing or the economy, please call or email me at any time.  I can be reached via email at Bill’s Email or call me at 978-273-3227.

Bill Nickerson Training for the Pan Mass Challenge

 

How to Shop for a Mortgage

After hitting record lows of 3.250% last year, mortgage rates have inched up a little and in the grand scheme of things…it is only a little!  The trend of course is upwards and like the stock market, it is not a straight line up, we have good days and bad days in the markets and Mortgage Rates can sometimes and do change a few times inside a trading day. These rate changes are influenced by the global economy and while rates are still extremely low, refinancers and homebuyers are always looking for the lowest. Rates trade in real-time and react to each little development. But these lows come and go in minutes during specific trading intervals each trading day. And this kind of volatility drastically changes the way consumers should shop for a mortgage.  Because markets move up and down so fast right now, the rates you see in mainstream media* headlines are long gone by the time you can do anything about it.

SO HERE’S HOW TO SHOP FOR A MORTGAGE IN THIS NEW WORLD.

Shop For Loan Agents, Not Rates

Every consumer shops for mortgages and they should. But this is the critical distinction: you should be shopping for the best mortgage advisor. If you have that, you’ll get the best rate.

Here’s what happens when shoppers focused only on rate get quoted by a good loan agent: Loan agent quotes a rate only after they’ve analyzed the client’s entire financial profile and analyzed their home’s value and condition—also known as pre-approving them. The client will either tire of the pre-approval analytics or be unhappy with the rate and go somewhere else. Then 80% of those cases come back to that loan agent because the competing rate quote was revealed to be incorrect when the other lender actually completed the client’s profile, or the home’s value/condition made the loan ineligible.

Mortgages are extremely competitive so rates and fees are generally the same with most (established, credible) lending firms.  What’s not the same lender to lender is the loan agent’s ability to: (1) advise properly, (2) analyze borrower and property profiles, and (3) close with no surprises. So shop to find the lender and loan agent you feel most confident can perform on these three things. Then work with that loan agent to pick a rate target you can’t or won’t go above, and give them a standing order to lock when they see it.

These guidelines are for refinancers. For homebuyers, you can’t lock a rate until you’re in contract to buy a home, but once you’re in contract, the same approach applies.

Rate Targeting

Their are two reasons for the pre-approval and rate targeting tactics discussed above:

(1) A rate quote that flies through the air means nothing. If a loan agent doesn’t issue you written terms after obtaining a full profile on you and your home, then you haven’t received a quote you can count on.

(2) Rate lows are here and gone in minutes each trading day as mortgage bonds rise and fall on economic and technical trading signals. So if you don’t first get pre-approved then set a rate target with a standing lock order, it’s nearly impossible to hit the lows AND close with no surprises.  Your loan agent also must be able to brief you daily or weekly on the market outlook, so if you’re not sensing market competence from your agent, then keep shopping. A loan agent must have a strong read on what’s impacting the rate market ups and downs to deliver you the best terms.

*Mainstream media is almost always off the mark on rate data and commentary. Conversely, Mortgage News Daily strives to provide accurate and realistic rate data and commentary daily. Still, the premise of this piece is to explain what a mortgage consumer must do to manage extreme rate volatility.

Do you have any questions?  Feel free to call or email anytime!!

Bill Nickerson can be reached at 978-273-3227 and email at bill@billnickerson.com

 

The Good Faith Estimate

A good faith estimate (GFE) must be provided by a mortgage lender or broker in the United States to a customer.  The estimate must include an itemized list of fees and costs associated with the loan and must be provided within three business days of applying for a loan.  These mortgage fees, closing costs and pre-paid items cover every expense associated with a home loan from legal fees, recording fees, title insurance, taxes and other charges.  A good faith estimate is a standard form which is intended to be used to compare different offers (or quotes) from different lenders or brokers.

The good faith estimate is only an estimate. The final closing costs may be different; however the difference can only be 10% of the third party fees.  Once a good faith estimate is issued the lender/broker cannot change the fees in the origination box.

It is important to look at everything that is listed, but it is especially important to see if additional costs are being built in such as Points, Broker Fees or high Administrative fees.  In all, a consumer should look at the bottom line number of the cost;  one, to make sure it is affordable to them and two, to be sure the costs are accurate and not over inflated in any way.  Click for more details about closing costs.

For more information about the good faith estimates or if you have questions regarding other home financing, please email me at bill@billnickerson.com or call me at 978-273-3227

10 Tips for First Time Homebuyers

1.  Be picky, but don’t be unrealistic.  Your first home may need a little work, some paint, carpet and perhaps some other updates.  Remember, this is your first home and the first step in investing in your future. Don’t avoid a home because it has bright pink walls or ugly floors.  Do avoid a home that may have structural damage such as rotted sills.

2.  Do your homework before you start looking.  Look online, work with a Real Estate Agent and begin the process of what style homes you like, neighborhoods and most important, the price range.

3.  Get your finances in order. Organize your bank accounts by having all of your funds in one or two different accounts.  Review your credit to make sure any and all accounts are up to date.

4.  Don’t wait to get a loan; Get pre-approved.  Call me today, 978-273-3227, get approved ahead of time to make sure you are properly prepared and you are realistically looking in the right price range. This is a free service!

5.  Don’t ask too many people for opinions.  Just because your best friend bought and sold 3 houses, does not make them an expert.  Ask the professionals that do this everyday.

6.  Decide when you could move. Set realistic time frames of how quickly you could move into your new home.  In the case of home purchases, some transactions can happen in as little as 30 days and some can take up to 6 months, you need to be prepared.

7.  Think long-term. Where do you see yourself in 10 years? Are you buying to be in a good school system? Closer to work? Close to the City?  Figure out what is important to you today, will these wants/needs still be important in 10 years?  It’s ok to buy a starter home and then re-evaluate in 5 or so years.  This is an investment and it’s your future.

8.  Don’t let yourself be “House Poor”.  Don’t over buy, your first home does not have to be 5000 square feet. You want to make sure you can still live your life and afford to go out to dinner.

9.  Don’t be naive. If you have never swung a hammer, don’t by a fixer upper. Do your homework on what updates to a home cost before purchasing a home that may need TLC.

10.  Get help from a real estate agent. This is your best resource for your home purchase. To be properly “matched” up, call me as I work with real estate agents all over and can refer you to one that best suits your needs.

Bottom Line:  Being a first time home buyer can be a scary uncertain time in your life, seek help from trained professionals to get the best most up-to-date information.

At Merrimack Mortgage, our mortgage programs are designed to assist the many different needs of each unique individual’s needs.

Call or email me today to find out how I can assist you in financing a new home or refinancing your current one. 

Bill Nickerson NMLS#4194   179 Great Road, Acton MA 01720

Phone: 978-273-3227     Bill’s Email       Bill’s Website

As the Dust settles…mortgage rates improve!!

As I spoke a little the other day in the midst of the mortgage rate meltdown, many of us suspected that this was Wall Street overreacting to the Fed’s comments.  Now, before I say I told you so, we have to analyze what Ben Bernanke said last week.  It was clear and there were two parts to the story.

Not so easy it is Ben??
Alan Greenspan having a chuckle…

The first, Mr. Bernanke stated how the economy was heading in the right direction, things were getting better and it some point in the future the Fed would begin to start “tapering” its bond buying program that it has done for a few years now.

It would appear, the children running Wall Street only heard one thing….”There is Cake and Ice Cream in the break room!!”  What they missed was, “You can’t have any until you clean your room.”  Now, isn’t that much clearer to put it this way??

The Fed Chairman then followed his positive outlook comments by saying he was not altering its primary stimulus program, its stated intention to hold short-term interest rates near zero at least as long as unemployment remains above 6.5 percent and inflation stays under control.  This would be the cleaning the room part.

Mr. Bernanke said that the Fed intended to reduce the volume of its monthly bond buying later this year.  The Feds are currently buying $85 billion a month in Treasury securities and mortgage-backed securities to keep rates as low as possible.  What caught investors ear was “Later this year” he would start cutting his treasury buying program…this was sooner than originally planned.  Thus causing a panic in Wall Street and around the world where mortgage rates went up and the stock market tumbled.  Very rare to have both of these markets take a dive as they did. The Feds are now doing damage control and trying to put out a clear statement, which is working to some degree.

Now, back to the part of where “I told you so”, today’s headlines in several of the Mortgage News updates, “Mortgage Rates Fall at Fastest Pace in June”.  We are seeing a some improvement!  I don’t thing we will get back to the lows of earlier in the year, but we should see this calm down a bit and settle in to the low 4’s.  This is my opinion and anything can happen with the economy.  Mr. Bernanke is a few pay-grades above me and he did not see this coming!!

Bottom line: If you are looking to buy a home or possibly refinance, the current rates are still at their lowest they have been since the 1960’s!!!  To give you an idea of what this may cost you if you were to borrower $100,000 at today’s rate of 4.50%, it would be $507 per month compared to $450 at 3.5% that we were quoting in April. This is only an increase of $57 per month.  This is based on a 30 year fixed rate with 0 points.

Is it the right time to buy?  Of course, if you are looking for a new home, it has never been a better time.  Ok, perhaps last month would have been better, but this still pretty darn good!!!

Do you have questions about buying a home? Do you have questions about what is the right program?  This is what I am here for, to help guide you through the process, to make it easy, affordable and most of all, get you and your family in to the home of your dreams.

Email me anytime with any questions you may have about the home buying process.

Bill Nickerson NMLS #4194

Merrimack Mortgage Company179 Great Road Acton MA 01720

Bill’s Email

So…What happend to Mortgage Rates??

As we have learned…The Fed, The Economy and Wall Street are very similar to the weather here in New England, just wait 5 minutes and it will be different. In this case it was a True Nor’ Eastah!!

Oops…was I not clear enough??

The Fed, which can be a love hate relationship, has a strategy that has been open-ended, it just pumped money into the economy, hoping things got better and for the most part, the economy is heading in the right direction.   Now, Fed Chairman Bernanke says he has a more definitive game plan or at least as definitive as the Fed can be!!  Mr. Bernanke will continue to buy Treasuries and bonds to stimulate the economy until unemployment falls to at least 6.5 percent — and as long as inflation stays low.   Overall, this has been his plan and he is announcing that if we keep this pace, he is going to back off on pumping these funds into the markets or increase as needed.  As we saw last month, Unemployment creeped up to 7.6% indicating the economy slowed.

Because of the comments and the timing of The Fed’s message this past week,  Investors on Wall Street ignored the details of Ben’s plans, even know they really have not changed that much.  The idea is to inject enough money into bonds and treasuries to keep long and short term rates low which will allow slow and steady growth in all sectors with Housing being the main focus.

“I think Wall Street overreacted,” said Bloomberg Government’s Nela Richardson. “It was almost as if Bernanke punched Wall Street in the collective gut, and that’s not what his intention was. He said — very clearly, I thought — that the Fed would begin to taper if — and only if — the fundamentals looked good. Not good enough, ‘good.'”

The markets are misreading the Federal Reserve’s messages as Investors reacted in a big way; the Dow Jones Industrial Average suffered its worst loss of the year. In the two days since Fed Chairman Ben Bernanke said the central bank expects to curb its big bond-buying program later this year, stocks tumbled, long-term interest rates rose and interest-rate futures contracts fell, meaning investors bet the Fed would raise short-term interest rates sooner than previously expected.

What investors did not hear was his second point: If the Economy does not meet the Fed’s expectations,  Ben Bernanke is then willing to adjust the pace to keep interest rates low.  Investors, the Markets, Wall Street and many others ignored this statement!  Again, causing the Dow to have it’s largest drop in over a year and mortgage rates to surge to their highest point in over 2 years.

So, where are rates today?  Just over a month ago, the 30 Year Fixed Conforming Mortgage rate was trading at 3.5% (plus or minus an 1/8^th).  Today, we are seeing this same rate trade at 4.375%-4.625%.  A full point higher than just a month ago. On a $100,000, this is an increase of $105 per month and on a Loan amount of $417,000, this is an increase of $240 per month.

In my opinion as well as a few others, we should see some type of correction in the Markets.  As these rates have moved so fast, it is possible this slows down the economy even more. It has brought refinancing of homes to a complete stand still.  Purchases should still move forward, but it will cause buyers to rethink the amount they are borrower in some cases.

For more information about mortgage rates, programs and the economy, feel free to email me at Bill@billnickerson.com

National Open House Weekend April 20 and April 21, 2013

Did you know it is National Open House Weekend?  The National Association of Realtors is expecting to sell almost 10% of the current inventory. With lots of homes on the market and great low rates, this spring market is turning out to be fantastic!  This weekend real estate agents from around the area will be hosting open houses as part of the national Open House Weekend.  The Open House Weekend provides a great opportunity to visit some of the many homes in your local area while learning more about homeownership from a professional real estate agent.  Be sure to take advantage of this weekend and attend some of the open houses in your area!

Call me today to see the closing cost credits you are eligible for!!   

Need a realtor? Call me.  Need a real estate attorney?  Call me.  Need a mortgage or pre-approval?  Call me.  Have financing questions?  Call me.  Bill Nickerson 978-273-3227

Or send me an email at bill@billnickerson.com  If you need to apply online, visit my website at www.billnickerson.net

Another Reason to Own A Home

In case you need another reason to purchase a home for you and your family; Here is an article I just read in the National Mortgage Professional Magazine, “Study Concludes Homeownership Tied to Positive Outcomes for Children“.  According to a new study by professors Richard K. Green and Gary D. Painter at the University of Southern California and Michelle J. White at the University of San Diego, “Homeownership is associated with lower high school dropout rates and lower teen birth rates.”  To read more about these findings, go to NMPM: Study Concludes Homeownership Tied to Positive Outcomes for Children and view the study results at Measuring the Benefits of Homeowning: Effects on Children Redux.  Let me know what you think about this information.  Do you agree or disagree?

For more information about home financing or the economy, please contact me at 978-327-3227  or Bill@billnickerson.com